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Multinational companies operating in the Asian growth economies will be exposed to spiralling environmental risks over the coming decades, according to Maplecroft’s 5th annual Climate Change and Environmental Risk Atlas , which identifies Dhaka, Manila, Bangkok, Yangon, Jakarta, Ho Chi Minh City and Kolkata as the cities facing the most risk from the onset of climate change.

Maplecroft’s Climate Change Vulnerability Index (CCVI), which forms a central pillar of the Atlas, classifies seven cities as ‘extreme risk,’ out of a list of 50 that were chosen for their current and future importance to global business. Dhaka, Bangladesh, (ranked 1st), Manila, the Philippines (2), Bangkok, Thailand (3), Yangon, Myanmar (4), Jakarta, Indonesia (5), Ho Chi Minh City, Viet Nam (6) and Kolkata, India (7) emerged as the most at risk from the changing temperatures and weather systems that are forecast to take hold in the coming years.

The CCVI has been developed by Maplecroft to identify risks to populations, company operations, supply chains and investments in 197countries down to a level of 25km2. It evaluates exposure to climate related natural hazards; the sensitivity of populations; development; natural resources; agricultural dependency; research and development; government effectiveness and education levels.

Maplecroft's Climate Change Vulnerability Index 2013

Asian growth economies posing long-term risks to business

With strong economic growth of above 5% forecast for countries such as the Philippines, Viet Nam, Indonesia and India in the next few years, the relevance of climate change to populations and business in the major commercial centres should not be underplayed, states Maplecroft in its analysis.

“As global corporations expand into the emerging growth markets, their operations and supply chains will become exposed to a complex set of climate risks that have the potential to disrupt business continuity,” states Maplecroft’s Head of Maps and Indices, Helen Hodge. “It is essential for companies to identify where suppliers, assets and personnel are most at risk and plan for the long term.”

‘Extreme risk’ cities may see an increase in frequency and severity of key hydrological and meteorological events. Recently, we have seen major flooding in Yangon in 2008, Bangkok 2011 and Manila 2012, and such events could become both more frequent and severe in the future. Long-term changes in temperature and rainfall patterns could have devastating effects on ecosystems, human health, industrial processes, supply chains and infrastructure.

The vulnerability of cities in the growth economies stems not only from their exposure to climate related hazards, but also the sensitivity of their populations and the poor capacity of governments to support local adaptation measures to combat the potential effects of climate change. Maplecroft has been measuring these factors for all countries over three years, but there has been little discernible improvement in the host nations of the ‘extreme risk’ cities suggesting countries are slow to make progress in combating the oncoming effects of climate change. Disaster risk reduction programmes, more stringent building regulations, better education and improved communications networks are therefore essential to secure the future stability of these cities.

Superstorm Sandy shows US resilience to disasters

The effect of climate change on tropical storms is still under debate, but there is growing evidence that their intensity, and in particular the associated rainfall, will increase. Single storm events cannot be definitively taken as evidence of climate change; but recent events on the East Coast of the US demonstrate the region’s exposure to climatic events.

New York, which took the full brunt of Superstorm Sandy, is ranked 41 of the 50 cities considered in the CCVI. Despite the city’s exposure to natural hazards, it is only categorised as ‘medium risk’ due to the USA’s ability to adapt to a major climatic event. The country’s strong economy and infrastructure, coupled with the extensive preparations before the storm’s landfall, enabled a relatively rapid return to operations for many businesses and services, with some of New York’s major airports and the New York Stock Exchange reopening only two days after the storm. In contrast Haiti and Cuba who were also impacted by Hurricane Sandy will take considerably longer to recover from the impacts of storm.

Manufacturing sector exposed to ‘high risk’ Chinese cities

A further 19 cities are classed as ‘high risk’ in the CCVI, including the important commercial centres of Mumbai (8) and Delhi (20) in India; Lagos, Nigeria (10); Johannesburg, South Africa (13); Rio de Janeiro, Brazil (21); and Hong Kong (14), Guangzhou (18), Shenzhen (19), Wuhan (23) and Shanghai in China (24). Chicago, London, St Petersburg, Paris and Madrid, meanwhile, were the only four cities to be classified as low risk.

The appearance of so many ‘high risk’ Chinese cities is of particular concern to companies using the country as a manufacturing base. Water stress is already a risk in China, due to the needs of industry and the agricultural sector, alongside swelling urban populations. Should climate change place further pressure on the country’s water resources by increasing the risk of drought, water intensive industries could find their ability to operate restricted.

Maplecroft's 5th annual Climate Change and Environmental Risk Atlas provides comprehensive analysis of the key risks to business in the areas of climate change vulnerability and adaption; emissions and energy use; environmental regulation; and ecosystem services. It includes 23 interactive maps and indices, which have been developed to identify, evaluate and compare climate change and environmental risks down to 25km2 worldwide and provide insight into current and emerging trends.